Thursday, February 16, 2017

Thursday Bloomberg Roundup, 2/16/2017

Can states win with a low-tax, anti-union strategy? A few are trying. How are they doing? The best way to answer this is to compare adjacent pairs of otherwise similar states. In this post, I take a look at Wisconsin vs. Minnesota and Kansas vs. Nebraska. Short version: laizzez-faire policies can create vast wealth for the poor and middle class don't seem to have much effect at all.

Economists might think that all the economist-bashing in the media is limited to a rabble of irrelevant angry British lefties. But in fact, the loss of status is real, and Trump's decision not to include the CEA Chair in his cabinet is just one more sign of that. If economists want to retain the extraordinary prestige they've amassed over the last few decades, they're going to need to make a few changes in the way they present themselves to the public. In this post I give three ideas for how they can do this.

More and more economists are pointing to rising industrial concentration and market power as the source of many of the problems in our economy. But what's behind that trend? In this post I suggest a few possible explanations - weakened antitrust, overregulation, and the influence of technology.

This post is a riff on a great Scott Alexander post about excess costs in America. The question is why America has anomalously high costs for health care, infrastructure, college education, and asset management. Government intervention doesn't seem to be the explanation, since other rich countries generally have more of this, alongside lower costs. Baumol Cost Disease also doesn't seem like the whole explanation, for the same reason. Market failures, of the kind that most econ students learn about, might be part of the reason. But I suspect that a lot of it comes from what Akerlof and Shiller call "Phishing for Phools" - a combination of limited information and outright trickery that reaches a bad equilibrium.

3 comments:

>"Economists might think that all the economist-bashing in the media is limited to a rabble of irrelevant angry British lefties. But in fact, the loss of status is real, and Trump's decision not to include the CEA Chair in his cabinet is just one more sign of that. If economists want to retain the extraordinary prestige they've amassed over the last few decades, they're going to need to make a few changes in the way they present themselves to the public."

You think? Not a single prominent economist predicted the great recession. Then everyone either agreed with austerity or went along with it. The miracle is that you have retained so much respect, not that you lost some.

(continued)Now, please don't misunderstand me, I am not saying that is a bad thing that economists retained some respect. I still think that current economics is probably much better than nothing. Which is harder than it looks as most layman theories are often a lot worse than nothing (like protectionism or communism). But the fact that no one can exactly say why e.g. "cost disease" is happening (as you admitted yourself) tells me that economists should avoid making grand pronouncements until they can say those things.